TSMC regains $500 billion mkt cap as investors clamor for AI, chips

Taiwan Semiconductor Manufacturing Co. regained its $500 billion market capitalization after investors ramped up bets on tech leaders best-placed to ride an anticipated AI boom.

Asia’s most valuable company gained more than 3% Tuesday, fueled also by hopes that a post-Covid chip downturn is nearing an end. That took its 2023 gain to 32%, cementing its position amongst the world’s 10 most valuable corporations after overtaking Visa Inc. in May. 

Investors are piling into stocks from Nvidia Corp. to Oracle Corp. they perceive as in prime position to ride surging demand for the chips, computing power and storage needed to train artificial intelligence services like OpenAI’s ChatGPT. The generative AI chatbot triggered a global wave of investment after its introduction in November, which in turn is expected to drive sales of the components and infrastructure needed to develop and host next-generation AI applications.

The AI frenzy accelerated after Nvidia wowed the market last month with a set of sales targets that surpassed the most upbeat analyst forecasts. Morgan Stanley this week raised TSMC’s price target, citing higher demand for energy-efficient and low-cost AI custom chip designs. 

“With the killer apps of generative AI (e.g., ChatGPT), we are seeing the semi industry’s growth stage shifting from the Mobile Computing to the AI Computing era,” Morgan Stanley analysts wrote over the weekend. “We view TSMC as a key enabler of future AI semis given its technology leadership.”

Charting the Rapture Around Global AI Stocks | Tech leaders from Nvidia to TSMC have surged during the frenzy

The broader rally persists despite warnings that market may be getting ahead of themselves, given the uncertainty over how to monetize AI services.

TSMC, while touting its own potential role in the rollout of AI, has expressed caution over the outlook for the smartphone market that still comprises a significant chunk of its revenue.

Its monthly revenue fell again in May after consumers and corporations cut spending on electronics. The consecutive contractions may suggest the chip industry’s slump has yet to hit bottom, though TSMC executives have called for a gradual recovery in the second half and a resumption of growth in 2024. 

Last week, Chairman Mark Liu said TSMC’s capital expenditure for 2023 may wind up close to the bottom end of a previously forecast range of $32 billion to $36 billion. That’s a signal TSMC, like its rivals across the electronics industry, remain cautious in the face of a cratering in consumer spending and an uneven post-Covid Chinese economic recovery. 

Liu also said the company can’t supply enough packaging capacity for advanced chips due to a surge in AI-related demand. On Tuesday, server assembler Inventec Corp. said a shortage of graphics processors or GPUs could let up only toward the end of 2023.